Not long ago, John Irvin was selling women’s shoes in the Nordstrom at the Pentagon City mall, pulling down about $20 an hour. Now he flips houses in Northern Virginia — scooping up short sales, rehabbing them and aiming for a quick sell. He has sold three homes so far and says he netted more than $30,000 in profit each time.
“If I do one house every quarter, I’m making $125,000 a year, at 25 years old,” Irwin said. “All my other friends, they have a 9-to-5 job. They make probably half of what I’m making right now. It’s kind of like hitting the lottery.”
Flipping earned a bad reputation during the housing boom thanks to speculators who bought and sold millions of homes in search of easy profits.
But the practice is gaining popularity again as the nation’s real estate market shows signs of life. The number of flips rose 25 percent during the first half of 2012 from the same period a year earlier, according to research firm RealtyTrac, and the gross profit on each property averaged $29,342.
RealtyTrac Vice President Daren Blomquist said the resurgence in flipping offers another indication that, in many parts of the country, housing prices have finally stopped falling. “There are flippers in any market, but a market where home prices are appreciating is much more forgiving for flippers than a market where prices are depreciating,” Blomquist said. “We have turned that corner in a lot of places in the last six months, so that’s going to attract flippers.”
Areas of the country that were hit particularly hard by the housing crash have seen the most pronounced boom in flipping, as investors gobble up foreclosures and short sales — properties sold for less than the owners owe on the mortgage — and resell them to buyers eager to take advantage of record-low interest rates.
The Phoenix area leads the country with nearly 10,000 flipped properties during the first half of this year. Las Vegas, Los Angeles, Miami and Atlanta also are high on the list. Maryland and Virginia also have seen an increase in the number of flips during the past year, according to RealtyTrac. The District saw a sharp increase starting two years ago though the percentage in the last year is down slightly.
“Loan applications have tripled in the past few months,” said Justin Konz, an executive at Chantilly-based Restoration Capital, a “hard money” lender that provides fast, short-term financing to flippers. Konz said the firm funds everyone from weekend warriors flipping a house or two a year to professionals turning around dozens of houses a month. “We thought it would slow down in the colder months,” Konz said. Instead, he said, business has picked up heading into the fall, with few signs of slowing.
With numerous investors and home buyers vying for a small list of available properties in the District and close-in suburbs of Maryland and Virginia, bidding wars and outsized offers have become a routine part of the landscape. The average gross profit for flipping a home in Maryland and Virginia is about $55,000, and it’s even higher in the District, according to RealtyTrac.